a) The company Tjocka Bertha uses both machines and labor in the production of golf clubs. These factors of production are imperfect substitutes in production. The company has a production budget of SEK 2,000 per hour. The workers have an hourly wage of SEK 200 and a machine costs SEK 500 per hour. Show with arbitrary isoquants how the company can maximize production per hour given the specified budget and production factor prices. Motivate.

b) How does the marginal productivity of workers relate to the marginal productivity of capital when production is maximized?

c) We usually talk about MRTS when we do such a (see question a) analysis, what is MRTS really? Why does it really look like it does?

d) Now assume that the factors of production labor and capital are perfect substitutes where both factors of production are equally effective. What mix of factors of production now maximizes production if the production budget and factors of production are unchanged?